We present evidence on whether workers have social preferences by comparing workers' productivity under relative incentives, where individual effort imposes a negative externality on others, with their productivity under piece rates, where it does not. We find that the productivity of the average worker is at least 50 percent higher under piece rates than under relative incentives. We show that this is due to workers partially internalizing the negative externality their effort imposes on others under relative incentives, especially when working alongside their friends. Under piece rates, the relationship among workers does not affect productivity. Further analysis reveals that workers internalize the externality only when they can monitor others and be monitored. This rules out pure altruism as the underlying motive of workers' behavior.
Authors
![Imran Rasul](/sites/default/files/styles/square_desktop/public/2022-08/Imran-Rasul.jpg?itok=8V_L5clA)
CPP Director, IFS Research Director
Imran is Professor of Economics at University College London and Director of the Centre for the Microeconomic Analysis of Public Policy at the IFS.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Oriana Bandiera
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Iwan Barankay
Journal article details
- DOI
- 10.1093/qje/120.3.917
- Publisher
- Oxford Academic
- Issue
- Volume 120, Issue 3, August 2005
Suggested citation
O, Bandiera and I, Barankay and I, Rasul. (2005). 'Social Preferences and the Response to Incentives: Evidence from Personnel Data' 120, Issue 3(2005)
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